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Watto started his life as a soldier on Toydaria. However, he left Toydaria after he suffered an injury. He then went to Tatooine, where he watched Jawas sell used goods and decided to start his own business.[4]

Watto then became a junk dealer living in Mos Espa, Tatooine. Owner of a small shop, Watto won two slaves, Shmi and her son, Anakin, from Gardulla the Hutt in a bet. Watto was an inveterate gambler, and when he discovered Anakin's natural podracing abilities, he sponsored the boy in several Podraces. Despite this, Watto often bet against Anakin, who was talented but lacked experience. Watto eventually lost Anakin to Jedi MasterQui-Gon Jinn in a wager on the Boonta Everace.[2]

Once Anakin returned to Tatooine, Watto asked him if he could help with some "deadbeats who owe me a lot of money." After being asked about Shmi, Watto tried to help Anakin find his mother, giving him all of the information he knew about Shmi's new life and location.[5]

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Watto was proud of his business and distrusting of Republiccredits, which he felt weren't "real" enough for the tough economy of an Outer Rim Territoryplanet like Tatooine. When Qui-Gon Jinn attempted a mind trick on him in order to get him to accept 20,000 credits in exchange for a T-14 hyperdrive generator, he shrugged it off, telling Jinn that as a Toydarian, mind tricks didn't work on him, "only money." Watto was a heavy gambler, and later lost the hyperdrive and Anakin in a bet he had wagered against the Jedi.[2]